Sunday, October 7, 2012

■ SOUTH AFRICA: 1Time wants reductions in fuel levy, taxes as private airlines react angrily to SAA bailout.

1Time (T6), the South African LCC, has clarified the air over reports in the press that it had written to the South African government seeking a bail out (akin to what national carrier South African Airways (SA) secured last week), stating that their proposal centred around the South African government subsidising the airline industry as a whole with selected levies and taxes, and not to only offer unfair bail outs to South African Airways and its affiliate SAExpress (XZ).

Blackie Komani
Blackie Komani
In an statement posted on its Facebook page, 1Time states that its Business Rescue practitioners sent a White Paper, entitled "Airline Industry Subsidisation", to various ministerial bodies on Tuesday, 2 October 2012, covering the state of the low cost industry, the specialised employment opportunities that 1Time has created for its 1100+ employees and 500+ service providers, challenges pertaining to costs and revenue structures, as well as the importance of fair competition and choice for consumers.
"The verbatim request for assistance is included herewith:
  • A reduction in the fuel levy and taxes to the Aviation industry to reduce the significant cost of fuel. 
  • A reduction in statutory levies and taxes the likes of charges by Airports Company of South Africa, Air Traffic Navigation Services, South African Civil Aviation Authority, South African Weather Services and the likes. 
These reductions in turn flow into the industry as a subsidy and benefit all and achieve the job retentions whilst supporting the consumer needs for travel and tourism."

1Time also noted that all of their creditors, and in particular, their largest, the Airports Company of South Africa (ACSA), had committed themselves "in principle" to 1Time's Business Rescue's course of action, working which it hoped would result in a a healthier, stronger airline.

Erik Venter
Erik Venter
In a more aggressive tone, the chairman of fellow competitor Comair Group, the parent company of the franchise "British Airways (Comair)" and LCC Kulula (MN), Erik Venter, has stated that SAA's bailout and government departments breached the state' s own aviation transport policy, though he stopped short of saying whether or not the group would take legal measures against the South African government.

In an interview last week with the now ex-South African Airways Chairwoman, Cheryl Carolus, following  her resignation and that of 7 other SAA board members, justified the carrier's USD600million funding claiming that a government strategy shift from being a carrier oriented towards long-haul flights mostly to Europe to being more Africa oriented, needed a "new, different" kind of fleet and therefore warranted more funds.
Cheryl Carolus
Cheryl Carolus
"We need a competitive advantage and have to shift with global trends, which see trade and business moving to Asia and South America. That also ties in with our tourism strategy of attracting new visitors from the East and the West and from the rest of Africa. SAA needs an injection of cash to strengthen its balance sheet and allow it to approach the markets to raise capital. We won't be able to fund a new fleet on our own."

Whilst Carolus' claims may in fact hold some merit, there are others who would point out other viable national carriers that have earned their right to extensive market shares, modern fleets and profitability through shrewd investments and running a tight operation that has taken the good with the bad.